PEAPACK, N.J. -- Pensions for thousands of employees at Pharmacia Corp. have been slashed as the company prepares for its acquisition by pharmaceutical giant Pfizer.
How hard workers who leave or lose their jobs will be hit after the Pfizer takeover will depend on the age, pay and seniority of each employee. Some workers could lose thousands of dollars, experts said.
Pharmacia also made changes that will prevent workers who are already vested for pensions from taking retirement funds when they leave. The practice known as "cashing out" usually results in a lump sum payment or a rollover into another retirement plan.
The Peapack-based company said all pension rules were followed when the changes were made. Pharmacia also said benefits such as severance pay and medical benefits for retirees were increased.
"The company believes that its overall separation benefits package is both fair and competitive and provides a bridge to future employment for all our employees who do not remain with Pfizer after the close of the deal," Pharmacia spokesman Paul Fitzhenry told The Star-Ledger of Newark.
Pharmacia workers said they are upset with the changes, particularly because the top eight executives at the company will get $110 million in severance and pension benefits when the acquisition is complete.
Pfizer, the world's largest drug maker, is expected to cut thousands of jobs after the $53 billion acquisition. Most of the job cuts are expected to come from Pharmacia's 2,200 workers in New Jersey.
Experts said that Pharmacia made the pension changes in the hope of avoiding paying millions of dollars into its underfunded plan before the acquisition. They said Pfizer doesn't want to be responsible for the cost when laid-off employees seek payment.
The acquisition was expected to be completed by the end of the year, but Pfizer said last week that a review by European regulators could mean a delay.
One expert said the pension move is becoming typical as employers nationwide continue to reduce benefits for employees.
"Back in the 1950s, people used to rely on their companies," said Leonard Witman, who teaches at Seton Hall Law School and Rutgers Graduate School of Management. "But now in the 2000s, it is not that kind of scenario."
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